Subsidies Flashcards
1
Q
define subsidy
A
money given towards a good with a positive externality or merit goods
2
Q
subsidy to producer
A
supply shift right
s = mpc
s1 = msc
d = mpb = msb
3
Q
subsidy to consumer
A
demand shifts left
s = mpc = msc
d1 = msb
d = mpb
4
Q
subsidy to producer evaluation
A
- PeD
- costly to implement
- imperfect information
- encourages inefficiency
- practically unpopular to give money to profit making firms
5
Q
subsidy to consumer evaluation
A
- increases price in market
- pes
- costly to implement
